Oil Watchdog

Best advice to motorists: Don’t ask why gasoline prices continue to fall — just enjoy the ride.

The current average for regular gasoline in San Diego fell
yesterday to $3.09 per gallon, down three cents since last Tuesday and
down 23 cents over the past month.

For those with longer memories, prices have fallen 41 cents
since June 8, when they posted their all-time regional high of $3.50,
according to the Utility Consumers’ Action Network.

Gasoline now costs 16 cents per gallon less than last year on this date, when the regional average was $3.25.

Behind the declining prices is a welter of data that most observers believe will cause prices to begin their traditional summertime climb.

Among the troubling factors from a motorist’s perspective is a
rebound in oil prices. Crude oil closed above $71 yesterday on the New
York Mercantile Exchange for the first time in 10 months. Middle East
political tensions reportedly played a role in pushing prices higher.

"We continue to believe that prices will trade above $75 and
may even try to test $78.40," Peter Beutel, president of the U.S.
energy risk management firm, Cameron Hanover, wrote in a research note.

National gasoline inventories, meanwhile, have fallen.
According to the federal Energy Information Administration, gasoline
stocks are about 10 percent lower than they were at this time last
year, despite near record levels of gasoline production.

The picture is nearly the opposite in California, with higher inventories and slightly lower production.

Across the nation, gasoline prices fell about 2 cents last week
to an average of $2.96 per gallon. Last year on this date, the U.S.
average was about 3 cents higher, or about $2.99, according to the
Energy Department.

California has a statewide average of $3.16 per gallon, down about 4 cents for the week and down 3 cents from last year.

In four of the past five years, gasoline prices in the United
States peaked in late summer or early fall, according to Energy
Department data. The below-normal fuel inventories and the possibility
of hurricanes that could disrupt supply may drive gasoline above the
record levels set last month, some experts say.

"The momentum for falling gasoline prices is slowing," said
Judy Dugan of the Foundation for Taxpayer and Consumer Rights in Santa
Monica.

Dugan says recent declines had a political component,
explaining that she believes the large oil companies sought to dampen
growing public rage and the possibility of a consumer-friendly federal
energy bill with lower prices.

"Oil companies, having killed almost everything they disliked
in the Senate’s energy bill, can drop their charade of good corporate
citizenship," Dugan said.

The declining national gasoline inventories, she said, are setting the stage for those price hikes.

Tupper Hull, a spokesman for the Western States Petroleum
Association, said California prices have fallen because refineries are
increasing production at the same time consumers have trimmed gasoline
demand.

In the first quarter, he noted, state data indicate gasoline consumption fell about 0.7 percent.

Hull declined to anticipate where prices are headed, however,
citing his association’s long-standing position against projections.

Bloomberg News and The Associated Press contributed to this report.